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Megan Moritz bought her dream house in 2019.
However, the 1,400-square-foot home in the suburbs of Arlington Heights northwest of Chicago was built in the 1930s and was free of insulation.
The first-time homeowner chose to pay around $5,700 for a series of projects last year, making her home more energy efficient. She added insulation to the walls and sealed sealed gaps in the ductwork connected to the furnace to prevent air leakage.
Moritz shaved more than half his gas heating bills over the winter, but her home now said, “A fun toast.” She cut her bill to $102 in December 2024 from $311 two years ago, records show. In January 2025, her bill was $116, starting from $288 in 2023.
Moritz received a $1,200 federal tax credit when he filed his tax return this year, according to records reviewed by CNBC. She is one of millions of homeowners who claim tax credits each year for renovations that are linked to energy efficiency.
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“To be honest, the biggest perk for me wasn’t freezing my butt,” said Moritz, who works for a global professional organization. “Then it was just as low as monthly bills.”
“The tax credit was a lovely little perk, cherry blossoms above,” she said.
However, tax deductions may not be available for a long time.
Republicans have indicated their intention to put in tax credits and other consumer financial incentives related to the Chopping Block Inflation Reduction Act to raise funds for the trillion dollar tax cut package negotiated in Capitol Hill.
What is a tax cut?
Tax credits, an energy-efficient home improvement credit, also known as 25C credits, are worth up to 30% of the cost of a qualification project.
Taxpayers can claim up to $3,200 a year on their tax returns, with the overall dollar amount tied to a particular project.
Up to $2,000 for installation of a heat pump, heat pump water heater or biomass stove/boiler, and $1,200 for other additions such as efficient air conditioning, efficient windows and doors, insulation, air sealing and more.
According to Internal Revenue Service data, approximately 2.3 million taxpayers have requested credit for their 2023 tax returns.
The average family charged about $880, according to the Treasury Department.
“More difficult decisions”
A thermal scan of Megan Moritz’s Chicago area home shows energy inefficiency.
Arc insulation
Blair Kennedy, a homeowner of Severna Park, Maryland, will be charging a credit when he files his tax return next year.
Kennedy, 38, installed fiberglass insulation in his attic and air-sealed the 3,700-square-foot home in March.
Kennedy expects the federal tax credit will cut his net costs to around $5,000.
“I think it was a much more difficult decision to do that,” real estate agent Kennedy said without a tax credit.
Tax credits have been on and off since Congress passed the Federal Energy Tax Act in 1978, according to a paper by Severin Borenstein and Lucas Davis, economists at the Haas Energy Institute at the University of California, Berkeley.
The original basis for the credit was to boost the US energy security following the energy crisis of the 1970s, they write.
Today, the main goal of the tax credit is to mitigate climate change, Davis said in an interview.
Making your home more energy efficient will help reduce greenhouse gas emissions that warm the planet. Residential energy use accounts for around 20% of US greenhouse gas emissions, according to researchers at the University of Michigan School for Environment and Sustainability.
The Inflation Reduction Act, a historic law to combat climate change signed by former President Joe Biden in 2022, extended the tax credit until 2032, making it even more generous. Biden-era finance officials said the tax credits are more popular than expected.
“Many of these clean energy technologies have great benefits, but tend to be a little higher than alternatives,” Davis said. “this [tax] Credit provides an incentive to spend a little more on capital investments that bring climate benefits. ”
Households can only claim tax credits if they have an annual tax liability. This is because the deduction cannot be refunded. Davis said the majority of the profit comes to high-income households, and they are likely to be liable for tax payments.
The risk of disappearance
The IRA also included many other consumer tax credits, as well as financial incentives related to electric vehicles, rooftop solar panels and energy efficiency.
Congressional Republicans could curb funding as part of an upcoming tax cut package, which is expected to cost at least $4 trillion, experts said. President Donald Trump pledged to fund the Gut IRA on the campaign trail, with Republicans voting more than 50 times in the House of Representatives to repeal some of the law.
“Absolutely, there is a risk that these credits will change or disappear completely with the current budget bill,” Davis said.
But there are groups of Republicans in the House and Senate who are trying to maintain their tax credits. Their support may be sufficient to preserve the incentive given the slim margins of each chamber.
According to a 2024 survey by E2, roughly 85% of cleaning investments related to funding the Inflation Reduction Act and 68% of jobs related to funding the Inflation Reduction Act are located in Republican Congressional District.
Move forward without tax cuts
Davis said many households could still be receiving energy efficiency projects, even if the tax cuts go away.
Experts said that in many cases, savings on utility bills is the main motivation.
Ryan Walkentien, director of Ark Insulation, who remodeled the Chicago area home in Moritz, said there is usually a five- to 10-year return on investment given monthly energy savings.
That time frame could easily be reduced to three to five years for those eligible for a tax credit, he said.
About $1,000 in January – A “crazy” high energy bill – Kennedy motivated him to undergo an initial energy audit to identify efficiency issues at his Maryland home. (Taxpayers may request a $150 tax credit for the costs of such audits.)
Kennedy wants to save at least 15% on his monthly energy bill. He also hopes to reduce stress on heating, ventilation and air conditioning units to keep the home at a comfortable temperature, extend lifespan and slow future maintenance costs.
“The tax credit ultimately turned into cake icing,” he said.
The same goes for Moritz.
“I’m literally in love with my house,” she said. “The investment I make in my home is for me, because I want to spend the rest of my life here.”
